‘Higher tax mop-up in Q1 shows revival’
NEW DELHI: Increased tax collection in the first quarter this fiscal shows that the economy is on the recovery path, minister of state for finance Pankaj Chaudhary said on Tuesday.
Net direct tax collection in the April-June quarter of the current fiscal is over ₹2.46 lakh crore, as against more than ₹1.17 lakh crore during the same period of the previous fiscal. “Reasons for increase in the collections include revival of economic activities and positive sentiments among taxpayers during this current financial year, leading to increased income estimates and higher advance tax payments in the first quarter of the FY 2021-22 as compared to the corresponding period of FY 2020-21,” he said in a written reply to the Rajya Sabha.
Net Indirect Tax (GST and non-GST) revenue collection in the first quarter of FY 2021-22 is ₹3.11 lakh crore, he said.
“The increased tax collection (direct & indirect) as reported in the first quarter of the current financial year as compared to the same period previous financial year shows that the economy is on the recovery path. Higher tax collection would enable Government in increasing public expenditure, which would have a positive impact on GDP,” Chaudhary added.
Icra Ratings on Friday said the government is set to exceed the budgeted tax collection target of ₹22.2 lakh crore for 2021-22, led by indirect taxes.
The government has budgeted a modest 9.5% growth in tax collections at ₹22.2 lakh crore for FY22, over FY21 collections of ₹20.2 lakh crore. However, despite the second wave of the pandemic, the April-June quarter tax collections rose to ₹5.6 lakh crore, which is 39% higher than Q1 of FY20. As stated differently, this is 107% more than Q1 of FY21 and 25.1% of the full-year target, according to an analysis by Icra.
The first quarter is traditionally moderate for tax collection, as the economic activity remains tepid.
The revenue department is yet to officially release tax collection data, but the finance ministry informed the Lok Sabha on July 19 that Q1 tax revenue mop-up reached ₹5.6 lakh crore.
The ministry also informed the House that the excise duty on petrol and diesel fetched ₹94,181 crore in Q1.
“Given that tax inflows in Q1 were 39% higher than the preCovid level (of Q1 of FY20), we expect the gross tax revenue to surpass FY22 budget estimate of ₹22.2 lakh crore. Growth in tax mop-up is led by indirect taxes, primarily taxes on petroleum products,” Icra chief economist Aditi Nayar said.
According to her, Q1 collections at ₹5.6 lakh crore is 107% higher than ₹2.7 lakh crore in Q1 of FY21, when the whole country was under lockdown last year.
“But more meaningfully, this is a full 39% more than the preCovid level in Q1 of FY20,” she said.
She further said while corporation tax, personal income tax and Central GST receipts in Q1 stood at 21-22% of the budget estimates, excise and customs collections already crossed 30% of the budget estimate, boosted by the high taxes on fuels as well as a relatively faster recovery in international trade.
Additionally, GST compensation cess mop-up touched ₹24,600 crore in Q1 or nearly 25% of the budget estimate.